OPERATIONS

MANAGEMEN
T
OPERATIONS AND
PRODUCTIVITY
 WHAT IS OPERATIONS MANAGEMENT?

 Production is the creation of goods and services

 Operations Management - management of the set

of activities that creates value in the form of
goods and services by transforming inputs into
outputs

 Applies
to both manufacturing and service
organizations
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WHIRLPOOL
 Manufactures and sells globally
 Major emphasis on Productivity
 Extra pay for employees
 Low prices for customers
 Larger market share and higher stock prices for
stockholders
 Quality,training, flexible work rules, gain-
sharing, global procurement Higher
productivity and lower scrap 3
THE HERITAGE OF OM
 Division
of labor (Adam Smith 1776 and Charles
Babbage 1852)
 Standardized parts (Whitney 1800)
 Scientific Management (Taylor 1881)
 Coordinated assembly line (Ford/Sorenson 1913)
 Gantt charts (Gantt 1916)
 Motion study (Frank and Lillian Gilbreth 1922)
 Quality control (Shewhart 1924; Deming 1950)
 CPM/PERT (DuPont 1957) 4
THE HERITAGE OF OM
 Material Requirements Planning (Orlicky 1960)
 Computer Aided Design (CAD 1970)
 Flexible Manufacturing System (FMS 1975)
 Baldrige Quality Awards (1980)
 Computer Integrated Manufacturing (1990)
 Globalization(1992)

 Internet (1995)
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CONTRIBUTIONS FROM
 Human factors
 Statistics
 Industrial engineering
 Management science
 Biological science
 Physical sciences
 Information science

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ORGANIZATIONAL FUNCTIONS

 Marketing
 Gets customers

 Operations
 creates product or service

 Finance/Accounting
 Obtains funds
 Tracks money
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FUNCTIONS - BANK

Commercial Bank

Marketing Operations Finance/

Accounting

Teller Check Transactions

Security
Scheduling Clearing Processing

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FUNCTIONS - AIRLINES

Airlines

Marketing Operations Finance/

Accounting

Flight Ground Facility Catering

Operations Support Maintenance

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FUNCTIONS - MANUFACTURING

Manufacturing

Marketing Operations Finance/

Accounting

Manufacturing Production Quality

Purchasing
Control Control

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WHY STUDY OM?
 OM is one of three major functions (marketing,
finance, and operations) of any organization
 To know how goods and services are produced
 To understand what operations managers do
 OM is a costly part of an organization
 OM presents interesting career opportunities e.g.
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SCM, QA, Process Re-engineering, etc
OPTIONS FOR INCREASING
CONTRIBUTION
Marketing Finance & OM Option
Option Accounting
Option
Current Sales Finance Production
Revenue : Costs: -50% Costs: -20%
+50%
Sales $100,000 $150,000 $100,000 $100,000
Cost of -80,000 -120,000 -80,000 -64,000
Goods Sold
Gross 20,000 30,000 20,000 36,000
Margin
Finance -6,000 -6,000 -3,000 -6,000
Costs
Net 14,000 24,000 17,000 30,000
Margin
Taxes @ -3,500 -6,000 -4,250 -7,500
25%
Contribution 10,500 18,000 12,750 22,500 12
WHAT OPERATIONS MANAGERS DO

 Plan - Organize - Staff - Lead - Control

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TEN CRITICAL DECISIONS
 Service, product design ……. Ch. 5
 Quality Management ……… Ch. 6, 6S
 Process, capacity design …... Ch. 7, 7S
 Location ….……………….... Ch. 8
 Layout design ………..…….. Ch. 9
 Human resources, job design.. Ch. 10, 10S
 Supply-chain management … Ch. 11,11s
 Inventory management ….…. Ch. 12, 14, 16
 Scheduling .…………………
Ch. 3, 13, 15
 Maintenance .………………. 14
Ch. 17
TEN CRITICAL DECISIONS
 Service and product design
 What product or service should we offer?
 How should we design these products and services?
 Quality management
 How do we define quality?
 Who is responsible for quality?

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TEN CRITICAL DECISIONS - CONTINUED
 Process and capacity design
 What processes will these products require and in what order?
 What equipment and technology is necessary for these
processes?
 Location
 Whereshould we put the facility
 On what criteria should we base this location decision?

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TEN CRITICAL DECISIONS - CONTINUED
 Layout design
 How should we arrange the facility?
 How large a facility is required?

 Human resources and job design

 How do we provide a reasonable work environment?
 How much can we expect our employees to produce?

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TEN CRITICAL DECISIONS - CONTINUED
 Supply chain management
 Shouldwe make or buy this item?
 Who are our good suppliers and how many should we have?

 Inventory, material requirements planning,

 How much inventory of each item should we have?
 When do we re-order?

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TEN CRITICAL DECISIONS - CONTINUED
 Intermediate, short term, and project scheduling
 Is subcontracting production a good idea?
 Are we better off keeping people on the payroll during
slowdowns?
 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?

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WHERE ARE THE OM JOBS

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